Newspaper article The Evening Standard (London, England)

Deutsche Damps Down Hopes for Bank Profits

Newspaper article The Evening Standard (London, England)

Deutsche Damps Down Hopes for Bank Profits

Article excerpt

Byline: HUGO DUNCAN

DEUTSCHE Bank today warned that UK banks are "not out of the woods yet"as it poured cold water on the notion the credit crunch is drawing to a close.

Banking stocks soared in London yesterday and in New York and Asia overnight ona wave of optimism that the worst of the crisis is over.

However, euphoria gave way to a rather more sober assessment of the situationtoday, with Deutsche warning of further downgrades in the sector.

Deutsche analyst Jason Napier said that although "the UK is unlikely to be thesite of another Northern Rock or Bear Stearns", profits will be hit by higherlending costs between banks and rising levels of bad debts among borrowers.City traders also warned that any nasty surprises could result in more heavyselling across the board.

Deutsche's top picks are Lloyds TSB , down 5 3 / 4 p to 474 1 / 2 p, andBarclays , up 17 3 / 4 p at 497 1 / 2 p. Royal Bank of Scotland rose 15 1 / 2 pto 376 1 / 2 p but sentiment once again turned against HBOS , down 14p to 590 1/ 2 p.

As if proof were needed that the credit crunch still rages, shares in ImperialEnergy crashed 22% after it was forced to abandon plans to raise funds in thedebt markets and instead said it will raise $600 million through a rightsissue.

The second-tier oil and gas explorer, which focuses on Siberia, struck astandby deal with Hoare Govett and Merrill Lynch to underwrite the shareplacing after other funding streams dried up. Shares fell 274p to 993p. The

FTSE 100 index failed to significantly add to yesterday's 150-point rally andNew York slid as it opened for trade. The Dow Jones fell 26.9 to 12,627.4 inearly dealing. The UK blue-chip index was up 41.1 to 5893.7 while the FTSE 250slid 43.8 to 19292.4.

Credit Suisse sounded a note of caution on UK builders as the housing marketcontinued to falter and mortgages grew harder to come by.

Housebuilding stocks have tumbled in the past 12 months, and Credit Suisse saidit awaits "evidence of stability in the underlying housing market before wewould consider turning positive". …

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